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On Report: Solar Added 50% More American Jobs than Oil and Gas Drilling and Pipeline Construction in 2014

Indeed. Statistics for the first nine months of 2014 found here shows that oil & gas added 3.005 quadrillion BTU while solar added only 0.096 - 31 times less. If solar actually added more jobs than oil & gas, it really speaks to enourmous economic inefficiency...

January 25, 2015    View Comment    

On How the Oil Price Slump Helps Renewable Energy

I would actually not be too surprised if we stay at these levels for quite a number of years. Alhough peak conventional oil is certainly a valid concern, there are numerous reasons why the extended period of excessively high prices we just went through should not be repeated. 

On the demand side there are a number of interesting trends at work. The most important of these I think is increasing ICE efficiency where the average new car being sold today is probably at least 30% more efficient than the average old car being scrapped. In addition, people (especially young people) are simply driving less for a variety of reasons that don't have much to do with the oil price. The global economy is also facing numerous headwinds which are not going away any time soon.

Furthermore, even though the global impact of alterative fuel vehicles will remain insignificant for many years, these emerging technologies will also moderate oil prices in the long run. Perhaps the most important medium-term impact of alternative fuel vehicles would be to keep ICE manufacturers focussed on efficiency even if oil prices remain closer to historically normal levels. 

On the supply side, the market may now have learnt how quickly US shale can scale and perhaps this will prevent an extended price overshoot like we just went through. Hopefully, the market can keep prices at the level where drillers just make an honest living instead of being at the receiving end of the economically inefficient wealth transfer caused by excessively high oil prices. The wild card is of course the Middle East, but perhaps a return to historically normal oil prices will not cause large supply disruptions, but instead help these nations to start a long overdue rebalancing of their economies.   

January 20, 2015    View Comment    

On How the Oil Price Slump Helps Renewable Energy

I partially agree with the analysis. It is somewhat ironic how subsidized renewables are dependent on healthy growth in disposible incomes while at the same time serving to limit said disposible income growth through increased energy costs. 

However, a time of prolonged low (normal) oil prices could restore the paradigm of plentiful cheap fossil fuels. This paradigm was partially unravelled over the past 8 years when oil, gas and coal were priced 3-4 times higher than their historical norms. This direct proof of the finite nature of fossil fuels was arguably an important factor influencing the sharp rise in renewable energy subsidies.

But people forget quickly, as clearly demonstrated by the broad classification of current (still above normal) oil prices as "low". Without immediate peak oil / energy security concerns, climate change is left as the major global driver behind renewable energy subsidies. Unfortunately, climate change remains a topic of much talk and little action. 

I therefore think that quite a lot depends on how long oil prices remain back closer to historically normal levels. 

January 19, 2015    View Comment    

On Net Metering for Rooftop Solar: How to Fix the Problems

I wonder if the CHP boilers (and their fuel), PV panels and batteries will also be taxed at an effective rate of more than 100% like grid electricity...

Also, people using CHP boilers to go off-grid in Germany will have to use these boilers for around 70-80% of their yearly electricity needs. With a large battery bank and/or PV oversizing, this reliance can perhaps be cut back to 50%, but this will be very expensive. Since German biogas is quite expensive and close to being maxed out, this will lead to an increased reliance on natural gas which is not really the idea of the Energiewende.

I was also wondering what happens if you are off-grid, using your CHP boiler and your heating needs are much greater/smaller than your electricity needs. In this case, things could become quite uncomfortable and inefficeint. At best, you will then also need heat storage to improve the situation. 

Ultimately, this will mean that every home needs a full PV system, battery storage, a micro-CHP device (with reliable fuel supply), a heat storage device and some pretty smart electronics to control the whole thing. As an engineer, all of this totally unnecessary complexity makes me very worried.  

January 18, 2015    View Comment    

On Net Metering for Rooftop Solar: How to Fix the Problems

Just to clarify again: I'm not proposing that everyone pays the same fixed cost. What I am proposing is that people pay for the part of the total capital stock that they actually use. Probably the best way to do this would be to bill people proportionately to their rate of consumption (kW) during the time of maximum load (maximum capital utilization) each day. 

January 18, 2015    View Comment    

On Net Metering for Rooftop Solar: How to Fix the Problems

If it ever becomes genuinely more economical to go off-grid than to buy electricity from the utility then this is what should happen. However, the amount of capacity under-utilization associated with going off-grid makes this the most expensive, lowest EROI and most environmentally damaging form of electricity generation available, especially in higher latitudes. 

We will have to see some massive technological breakthroughs before it becomes economically viable for a significant percentage of electricity consumers in an industrialized society to go off-grid. 

 

January 17, 2015    View Comment    

On Net Metering for Rooftop Solar: How to Fix the Problems

Well, the CAPEX would of course be distributed according to the amount of it utilized by each customer, i.e. the consumption rate (kW) during peak times. Large customers who draw massive loads would therefore pay a lot more than small customers who only run a few home appliances.

What this kind of rate structure would do is to strongly incentivise peak shaving within the consumer base. Everyone would know that they can substantially reduce their bills if they just limit their consumption for a short time during certain times of the day. This would significantly reduce the generating, transmission and distribution capacity that needs to be installed to serve the needs of the consumer base, thereby making the entire system cheaper (which of course must translate into lower overall rates for the average consumer).

January 16, 2015    View Comment    

On Net Metering for Rooftop Solar: How to Fix the Problems

The solution is of course to price electricity according to its real cost drivers as the paper suggests. The vast majority of electricity costs are CAPEX related and setting prices as if most costs were OPEX related will naturally lead to substantial capital under-utilization and other economic inefficiencies. 

Presumably the main reason why such inefficient rate structures are implemented across the world is because it is simple. Basing electricity bills primarily on consumption rate (load) during peak times will be complicated and can also result in some very unhappy constomers when they receive a nasty shock due to a few minutes of accidental high consumption at the wrong time. Perhaps smart meters will solve some of these issues in the future. 

The other problem with implementing these more economically efficient rate structures is of course that it will kill the distributed PV market. As is common with subsidized energy, a large industry has now developed that is completely dependent on continued subsidies for its survival and this will make market reform progressively more difficult as the industry grows.

As a last point, it should be pointed out that, as more utility scale clean energy resources are brought online, the economically optimal rate structure will shift even more to the CAPEX side, thereby completely wiping out the business case for rooftop solar. Since OPEX-type $/kWh costs will be close to zero in this case, savings from rooftop PV will be negligibly small as long as a grid connection exists. The tiny offgrid market will be the only viable business case in such an environment. 

January 15, 2015    View Comment    

On Everything Has Changed: Oil, Saudi Arabia, and the End of OPEC

I agree that it is important to acknowledge the new elements which differentiate the current situation from previous episodes of OPEC intervention. As I see it at present, these elements are (in order of priority): 1) unconventional oil (primarily shale), 2) great advances in efficiency (4-cylinder engines, small clean diesels and hybrids), 3) alternate fuels (biofuels and battery electrics) and 4) political pressure on CO2 emissions. 

These elements will combine to both limit future global demand growth for OPEC's oil and to cap the price that the market is willing to pay for this oil. For this reason, the total purchasing power that OPEC nations gain from selling their easy conventional oil has probably peaked and this indeed represents an important fundamental shift in how decision-makers in these nations see the future of their economies. 

I'm not convinced that CO2 considerations will have large impacts on OPEC in the medium-term future though. Limiting CO2 via various policy measures to strongly limit oil consumption will probably do more harm than good by impeding the economy to effectively go after other lower hanging decarbonization fruits. There are many other more important reasons for controlling oil consumption and imports including energy security, congestion & traffic accidents and even local air pollution. 

January 12, 2015    View Comment    

On Everything Has Changed: Oil, Saudi Arabia, and the End of OPEC

Thanks for an interesting analysis. However, I would stop short of pegging this drop in the oil price to the carbon asset bubble deflating. My view is that this is simply a return to the expected fossil fuel price trend after the meteoric rise of China caught global energy production off gaurd in the last decade. The result was a quadrupling in the oil price (and a tripling in coal and natural gas prices) which obviously could not last forever.

These massive price increases naturally led to more expensive supply being brought online, but this could not be done fast enough. Now, US shale drillers and other unconventional oil producers have finally managed to get the expectation of future supply to the level of muted demand expectations and the result is a normalization of the price towards historically dominant levels (about $35/barrel in today's prices). The long term price trend from this point onwards will be upwards as more unconventional sources become necessary to meet global demand, but $110/barrel oil was obviously unsustainable.

This prolonged period of exceptionally high oil prices has also stimulated research into increased efficiency and alternatives to oil-derived transportation which is certainly a very good thing. These technologies will moderate future global demand increases driven by the 6 billion (and counting) people who still have one order of magnitude less material affluence than us developed world bloggers. Hopefully this will help prevent another great global price shock like the one we just went through. Consistently cheap oil is certainly a very good thing for global development which, in turn, is essential for overcoming the sustainability crisis of the 21st century. 

January 9, 2015    View Comment    

On Raise the Gas Tax

I'm all for taxing consumption rather than production, but one has to be very realistic about how much of this can be achieved in practice. Probably a large part of the reason why it is customary to get most tax revenues from production (income) is because it is simple. When taxing consumption with externalities playing a large role, the complexities quickly start to mount. 

For gasoline, some of these complexities have already been named. For example, it is obvious that congestion and accident externalities vary greatly from one region to another, implying that a fair system would track exactly where everyone has been driving in order to put a fair number on the tax return. Naturally, this is not possible. 

Many other examples of externalities related to various types of consumption can be named. One interesting example is the health effects related to excessive consumption of various unhealthy foodstuffs. The USA now spends 1 in every 5 dollars turned over in the economy on health care - a truly stupendous amount of money - and achieves one of the lowest life expectancies in the developed world. Much (if not most) of this massive expenditure can technically be avoided via healthier consumption habits (e.g. Japan's healthcare expenditure relative to GDP is half that of the US and their average life expectancy is a full 5 years longer). 

The potential postive economic impact of fixing this externality dwarfs that which could be achieved via gasoline taxes, but this will not happen due to a long list of rather obvious complexities related to this form of taxation. 

Overall, my view is that it is not really worth it to try and internalize short-term local externalities like congestion and air pollution. The people who experience the negative effects of these externalities (the same people who benefit from causing them) will demand change before the costs begin to excessively outweigh the benefits. The thing that needs to be taxed is long-term global externalities (where those who cause negative externalities can be separated from those who experience them by thousands of miles and tens of years). The most obvious example of this is CO2, but other even more politically sensitive examples can be named like the excessive fertility described by Bill below and excessive self-destructive consumption as in the above example. 

January 8, 2015    View Comment    

On Wind and Solar Energy: Transforming the Grid with Clean Energy, Reliably, Every Day

To affirm what Roger said below, most power plant downtime is planned and will obviously be scheduled during times of low load when the unit in question can be taken offline without requiring any backup. Even in the minority of cases when something goes wrong requiring an unplanned shutdown, operators will have a number of hours of flexibility to take the affected generating unit offline at the time when it has the least impact. 

Problems arise when generation drops during times of high load. Thermal plant operators proactively ensure that this very rarely happens. For wind and solar, however, there is nothing you can do to prevent the elements from turning against you during days and hours of maximum load.

January 3, 2015    View Comment